Technical Analysis

AUD/USD Price Analysis – Dec 07, 2023

By LonghornFX Technical Analysis
Dec 7, 20233 min

Daily Price Outlook

The AUD/USD currency pair failed to stop its declining streak and remained under some selling pressure near 0.6530 for the fourth successive day on Thursday. However, the reason for its downward trend could be associated with China’s economic woes and RBA rate cut bets, which weigh on the Aussie and contribute to the losses in the AUD/USD pair. In contrast to this, the dovish Fed expectations might cap any further gains in the US dollar and lend some support to the AUD/USD currency pair.

China's Trade Shifts, Moody's Downgrade, and RBA Rate Cut Outlook Affect Australian Dollar (AUD)

It's worth noting that China's trade surplus surged to $68.39 billion in November, up from the previous $56.53 billion. The report revealed a surprising 0.5% increase in exports but, worryingly, a significant 0.6% drop in imports, signaling concerns about weak domestic demand. In the meantime, Moody's downgraded China's credit outlook, affecting state-owned firms and banks, and dampening investor interest in riskier assets.

On top of this, Australia's trade data was not impressive, and growing expectations of a Reserve Bank of Australia (RBA) rate cut around August/September 2024 are weighing on the Australian Dollar and contributing to the AUDUSD currency pair.

USD Strength, Cautious Sentiment, and Fed Expectations Impacting AUD/USD Pair

Moreover, the risk-off market mood is helping the safe-haven US Dollar to maintain its recent strength, reaching a two-week peak on Wednesday. This is putting some pressure on the AUD/USD pair. However, expectations of a more dovish stance from the Federal Reserve (Fed) are capping further USD gains and providing a support to the Aussie.

Investors believe the Fed won't tighten its policies further and are now leaning towards a 25 bps rate cut in the upcoming March meeting. This shift is backed by recent US data hinting at a potential easing in the historically tight job market.

Looking ahead, investors will be closely monitoring the release of the Weekly Initial Jobless Claims data from the US. Furthermore, attention will be on the highly anticipated US monthly employment details, commonly referred to as the Non-Farm Payrolls (NFP) report, scheduled for Friday.

 AUD/USD Price Chart – Source: Tradingview
 AUD/USD Price Chart – Source: Tradingview

AUD/USD - Technical Analysis

On December 7, the Australian Dollar (AUD/USD) experienced a decline, registering a 0.27% decrease to 0.65321. The currency pair, in the broader scope of the Forex market, is situated at a crucial juncture, hovering around the pivot point of $0.6530. The AUD/USD faces immediate resistance at $0.6602, followed by higher barriers at $0.6639 and $0.6713. Conversely, immediate support is established at $0.6493, with additional support levels at $0.6456 and $0.6419, potentially providing stability against further declines.

The Relative Strength Index (RSI) for the pair stands at 34, indicating a bearish sentiment as it resides below the neutral 50 mark. This suggests that the pair is neither in the overbought nor oversold territory, leaving room for potential directional changes. The Moving Average Convergence Divergence (MACD) is marginally negative at -0.00056 compared to its signal line at -0.00185, hinting at a subdued bearish momentum.

Notably, the AUD/USD is trading just below the 50-day Exponential Moving Average (EMA) of $0.6562, further underscoring the current bearish inclination. The observed upward channel breakout and the closing of candles below the 0.6550 level suggest selling pressure in the market. This technical pattern indicates a potential continuation of the bearish trend, provided the pair remains below the crucial 0.6550 threshold.

In conclusion, the AUD/USD pair exhibits a bearish bias in the short term, predominantly influenced by technical indicators and chart patterns. The currency pair's movements are likely to be contingent on the broader market sentiment and economic data releases, with a focus on resistance testing if there's a shift in market dynamics.

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